ETMarkets Smart Talk | 2 bank stocks among 3 top ideas for this week from Vikas Jain

Vikas Jain, Senior Research Analyst of Technical and Derivative at Reliance Securities, says Nifty’s current consolidation at higher levels augurs well for bulls, and he expects the index to scale an all-time high in the coming weeks. Federal Bank, Kotak Bank and SAIL are top 3 trading ideas for the week. Edited excerpts from an interview:

After the sideways movement seen in Nifty in the week gone by, how are the charts looking for the coming week? Do you think the index would be able to break above the 18,400 to rally towards 18,600 levels?
Nifty50 tested the monthly pivot resistance near 18,400 levels and witnessed a sideways move in a narrow range holding its short-term 8-day average. The current consolidation at higher levels augurs well for the bulls, and we expect the index to scale an all-time high in the coming weeks. Midcaps are underperforming the broader markets as they are down by 1.5% month-to-date while Nifty is up by 1.5% during the period. However, on the higher side crossover of 18,500 will trigger a breakout which would lead to a sharp up move in high beta sectors and stocks.

Is the Nifty Bank giving signs of slowing down of momentum? What are the levels to watch out for?
Bank Nifty momentum is slowing down as midcap private banks are witnessing a corrective action while PSU Banks continue to outperform the positive momentum. We believe it will face resistance near 43,000-43,200 levels as it is the highest call OI for the monthly expiry, and breakdown below 42,100 will trigger profit booking being the last week lows.

Rail stocks stood out in the week, with RVNL, Ircon and IRFC leading the rally. After the double-digit returns seen in the week, do you think the momentum can sustain? Any targets?
Rail stocks witnessed a sharp up move following the theme of the PSU defence sector, PSU Banks and now towards the PSU rail sector stocks. The momentum can continue for a few more days, but after a sharp up move in the last month to the tune of 20-55% in these stocks, it leaves very little upside at current levels and waits for some corrective action or retracement for fresh investments

Given the weakness seen in consumer and media stocks, is it best to avoid the pack at this stage?
The consumer sector declined by 3% from its 52-week highs, as the broader markets are witnessing some sector rotation over the past few weeks. Valuations are on the higher side trading, above 10-year averages and recent quarter results volume growth concerns further dampened the positive stance.

We believe there could be more corrective action price-wise and time-wise over the next few months. The Nifty Media Sector is at long-term support averages, and the recent correction in these stocks offers a good risk reward from current levels.

Which are the top 3-4 trading ideas for the coming week? Please share with targets.

FEDERAL BANK
CMP: 133 | RECO: SELL |TARGET: 120 | STOP LOSS: 142

• The stock completed a strong up move from the bottoms of Rs 84 to the high of 140 levels over the past 21 weeks.
• It made multiple tops in the range of Rs 138-140 levels and declined 2% w-o-w confirming a downward move.
• Weekly RSI reversed from the higher range, and key technical indicators on near time frames are negatively poised.
• Therefore, we recommend a directional short position for a target of Rs 120 with a stop loss of Rs 142.

KOTAK BANK
CMP: 1960 | RECO: BUY| TARGET: 2180 | STOP LOSS: 1810

• The stock has made higher bottoms on the weekly chart and has broken higher from its inside range to gain by 3% w-o-w.
• Its weekly RSI has turned upwards from the lower part of the range, and other key technical indicators on the near-term timeframe chart are positively poised.
• The stock has strong support near its multi-band of moving averages on the weekly time scale, and the strong positive momentum in the sector reinforces our positive stance.
• Therefore, we recommend a directional long position for a target of Rs 2,180 with a stop loss of Rs 1,810.

SAIL
CMP: 80 | RECO: BUY| TARGET: 95 | STOP LOSS: 74

• The stock has taken long-term support near its 55-month average and recovered sharply over the past weeks from its lower range.
• We expect a sharp breakout and crossover of 88 levels it's intermediate high to test 95 levels over the coming few months.
• Its monthly RSI is piercing upwards to cross its averages, indicating a strong momentum from current levels.
• Therefore, we recommend a directional long position for a target of Rs 95 with a stop loss of Rs 74.